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Sony Ericsson Posts Profit; Interview With Prime Minister of Finland; Interview With Prime Minister of Sweden

Aired January 20, 2011 - 14:00:00   ET


RICHARD QUEST, HOST: It's the earnings season and tonight, a close call, Sony Ericsson's back in profit, new products fall short. We hear from the CEO.

Learn from us, the prime ministers of Sweden and Finland say Europe needs reform. They speak to us.

And when does power become superpower? It is the "Q&A" big topic, and quiz.

I'm Richard Quest. We have an hour together. I mean business.

And a very good evening to you. And we thank you for joining us.

Big earnings are in focus tonight at the first reports of 2011 are painting an extremely uncertain picture for the corporate American scorecard. Thankfully for us we have the Q25. Because tonight if you're looking for example and proof that the global recovery is moving into full bloom, think again. Across these three companies, and others, that we will have in the Q25, you've got the good, the bad, the ugly, and results from eBay, Morgan Stanley, Sony Ericsson, amongst others that we will talk about tonight.

So, the Q25, with its various criteria, this is the segment that brings you the earnings season to help you make sense of the various categories. We put the companies through a rigorous set of tests and either give a green or a red chip, depending on whether or not they've met the criteria. We'll be hearing from the CEOs as well.

That is behind the numbers?

This is Maggie Lake, of course, in New York, who will be assisting us- well, she'll be doing more than assist. She'll be leading the charge. And this is the criteria that we will be talking about as we go through the various ones, which will come up in a moment. You will see the criteria: sales growth, profits growth, consecutive profits growth, beat expectations, future optimism, the Q25 criteria that determines. Remember, five out of five or four out of five and you get the color, three or two in either direction, and Maggie and I have a debate.

Starting with Morgan Stanley, Maggie.

MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT: Morgan Stanley had a pretty good looking report, Richard. And people were really worried. We have seen some real misses, notably Goldman, coming from the investment banking area. But Morgan got four out of five, so technically it gets an automatic green. But we always have a discussion about this. And I just want to raise a cautionary flag.

At first flush I thought, hey, this looks real great, they are really taking away market share from Goldman. But I spoke at a portfolio manager who said, you know, he's not completely convinced, business can be a little lumpy. Yes, they had a good quarter, he wants to see several of these strung together before he is going to believe that they are actually getting up to the ranks of Goldman, and JP Morgan. He doesn't think they are there yet. He thinks the bar is set lower for Morgan.

QUEST: And no doubt, Goldman took the news, Morgan has got the results, but even though we give it a green, Maggie, Morgan ain't Goldman.

LAKE: No, I don't think. A bit of a grudging green here, Richard.

QUEST: Ah, come on. A bit more than a grudging green. A glimmer of green, not a glittering green.

All right, how about eBay? Now, eBay, that was another one that actually left us no room for debate as to the color.

LAKE: Yes, five out of five, I mean, this is a fantastic report. I'm a bit of a downer tonight, maybe I'm just in a worrying mood. Listen, it was a good report. PayPal is looking really good from their payment system, if there is anything to worry about, some people seem a little bit worried still about that core marketplace business. It does seem things are turning around. They raised their guidance. But I think the jury is still out on that a little bit, Richard.

QUEST: It is a turn around. He's only-the CEO is only in year two of his turn around plan.

LAKE: True. True. It's true. You can't take anything away from this report, but it is a very competitive space. They've got Amazon out there. The one thing I did like, and this is why I sort of whole-heartedly go with the green, they are doing well in the mobile space. And that is where all the action is going to be. So, eBay is looking good.

QUEST: You remind me of one of those people that gets a second prize in the lottery, wins millions, and wants to know why haven't won the first prize.


QUEST: Five out of five-

LAKE: I'm just telling it like it is.

QUEST: Five out of five for eBay. There is no contest it is a green.

Southwest Airlines? I'm taking the lead on this one. It is merging with Air Tran. It has got a superb network. It is going to extend its reach. It is a strong performer. The results were maybe not as good as they could have been. But in the airline industry, nobody is doing brilliantly, Maggie.

LAKE: I'll agree with you here, Richard. And you know, interestingly, they got two out or five, so they could have gone the other way, but as we noted, they miss-when they miss, they barely missed on some of the criteria, so we had to give it to them in some cases And the thing I liked about them isn't really a number thing, it is a feel good thing. They don't charge as many fees on baggage. They really have a lot of commercials playing up that employee ownership. It is a feel good factor, I think people like them. They are really pissed off at the other airlines. I think that is going to bode well for Southwest.

QUEST: And that is why when you get a two or a three, on the criteria, Maggie and I, along with our producers, and one day we will film the actual debate that we have, we actually go hammer and tong. It is a green for Southwest Airlines. The chief executive, though, is worried about fuel. But he still gets a green.


GARY KELLY, CEO, SOUTHWEST AIRLINES: Clearly, we, along with the rest of our peers in the industry, would say it is fuel. It's all about fuel. And fuel prices were up 12.7 percent in the fourth quarter, versus a year ago. And we still had decent results. We would have had a record quarter, potentially. Or certainly had a better chance, had fuel prices not escalated so much. But in the first quarter, here, we are looking at 20 percent year-over-year price increases. And that is what is really tough for us to manage.


QUEST: And that, of course, tells us why they have got problems, but we still gave them a green.

Finally, on this part of the Q25, Sony Ericsson. On the plus side, the company went back into-

LAKE: There is a plus side?


QUEST: Hey, hey.

LAKE: There is a plus side here, Richard?

QUEST: The company went back into profit and after an 800 million euro loss, made the best part of a small profit in 20-or in the quarter.

LAKE: Cost cutting, a lot of it is cost cutting. Listen, I feel really-in technology it is very clear the pace is set. It is fast it is super competitive. And Sony finally found religion with the Android, but they seem to be really slow rolling out these products. Have you been in a store lately? People are not waiting around. I think they are really at a disadvantage here. I'm not feeling good about these products. And the CEO, himself is even saying that. So they have some ground to make up.

QUEST: As you'll hear in just a second. The CEO describes the results as OK. They are making progress. They have to get a red.

OK, Maggie, you-anybody gets in the way of Madam Lake tonight, on the highway, on the way home. Give her a wide birth.


Maggie, see you tomorrow.

I don't know what was in her coffee this afternoon.

So, Sony Ericsson failed to make the grade. And yet the company is turning around. It is part of a long process. Have they got the products necessary? Earlier I spoke to Chief Exec Bert Nordberg and I put it to him that the mobile phone maker was not quite there yet.


BERT NORDBERG, CEO, SONY ERICSSON: If you look on where we are coming from, for people who have studied the history. We had a very, very troubled year in 2009. And now we have delivered the 2010 results. So, if you look at the bottom line improvement you can see we did well, because it is 1.1 billion euro better. That took us to a quite small profit, because we came from a loss. I'd say we have done an OK year.



QUEST: OK, will not keep you your job in 2011 and 2012 will it?

NORDBERG: No, I don't think so. It is sort of-OK, is fine, according to where are plans were to take the company back to profitability, we have done well. So, if you say that 2010 has been the year of back to black, 2011 is definitely going to be the year of back to growth.

QUEST: Back to black, back to growth, I like it. The criticism of Sony Ericsson is that you have features phones, not smart phones. And you now need to develop your smart phone capability.

NORDBERG: And that has been the sort of the journey of the year and actually the reasoning for improving your results. That we for nine months have moved to the smart phone market and during the year we have launched four Android mobiles. Now we are moving into 2011. Four wasn't enough. 2011 will require more mobiles.

QUEST: Let's talk about Android, if we may.

NORDBERG: Yes, yes.

QUEST: This is your new phone, that you have introduced. Why has Android become so successful? Is it because it is the lowest common denominator, non-iPhone?

NORDBERG: Yes, you can-you can compare it to-it is sort of a quite viable competitor of software to the IOS software that Apple is using.

QUEST: But that his fair. That is almost damning it with fake praise, isn't it?

NORDBERG: No, I think it is sort of-it has some very, very good features. That is sort of unique to them. It does have a lot of good services. You get free navigation, you get the search engine, you get Google Maps, you can keep track of your friends.

QUEST: But you, as a chief exec of a hand maker, you like this don't you?

NORDBERG: Yes, of course.


NORDBERG: Yes, now, I think the services are working very well. And Android is, of course, not very expensive.

QUEST: The iPhone is only available on Apple, Windows 7 has still got a long to go, same with Symbian. Does Android win?

NORDBERG: Yes, I think so. But that is based on my personal history, working in the IT industry, that opened (ph) one (ph). So I think proprietary (inaudible) we talk about there, and proprietary can work well, but usually open gets the biggest market share.


QUEST: Bert Nordberg, the chief executive of Sony Ericsson, talking to me earlier.

This is how the Q25 stands at the moment. We have three, six, nine greens, and five reds. I think this is proving that has 2011, and the end of last year, the trading conditions are getting more difficult at the companies. And we have another, of course, we have another 11 or so still to go.

To Wall Street, where the market is open, and it is a quiet day. U.S. stocks following Europe and Asia. It is marginally changed. The worry here, of course, is China's inflation worries, which overshadowed and upbeat report on U.S. jobs. We will have the details on China's GDP 10 percent number, along with its inflation later in the program.

When we come back, in just a moment, the first of two prime ministers in the program, a plethora of PMs. I was in Helsinki speaking to Finland's prime minister before she came to London. Economic talking points, her Europe future points, in a moment.


QUEST: Scandinavian and Baltic leaders were meeting in London for a summit on Europe's economy over the last 24 hours. The British Prime Minister David Cameron welcomed the leaders from eight countries. It was a two-day meeting where they discussed how to boost economic growth in the region. The British PM said the countries shared interests stretched right across the north of Europe.

Finland's Prime Minister Mari Kiviniemi was one of the leaders at the summit. A couple of days ago I was in Helsinki to meet her. And I asked the prime minister, after she showed me around her rather beautiful officials residence, I asked the prime minister what she expected to come from a Baltic/Nordic summit?

MARI KIVINIEMI, PRIME MINISTER, FINLAND: I hope that we can learn from each other. I think that all the European countries are facing the same kind of problems. The aging of the population and we have severe economic problems so, I think that we can-we have a lot to learn from each other. From the ways we have been able to tackle, for example, those kinds of problems I just mentioned.

QUEST: The European Stability Facility, the bailout fund, the question is whether it should be enhanced. President Trichet says it does need to have more quantity and quality to it. Where does Finland stand on increasing the facility?

KIVINIEMI: We are not eager to increase and we are not ready to increase the size of it. But we, of course, all know that what we thought in the beginning when we launched, and built, that facility, the idea was the size of it is 440 billion euros. But now we all know that the actual size is much smaller. It is only 250 billion euros. So, also, Finland is willing to find ways to make that facility a bit more flexible. But we are not ready to increase the amount.

QUEST: There is no consensus really, is there, at the moment on this issue?

KIVINIEMI: No, that is true. It is rather difficult to find solutions because many countries are opposing so strongly the increase of the size of the facility. But I hope that through discussions we are able to find that kind of solutions which will stabilize the financial markets.

QUEST: Do you, Prime Minister, accept that for the euro to work well in the future there has to be greater coordination of fiscal policy?

KIVINIEMI: Yes, I think so. And actually, we have already made decisions at the European level, which will be implemented and during this year. And the actual decisions will be made at the-in June or July. So, I think we have made already, we have taken steps towards that direction and it could be that we need also more. And that kind of decision is difficult for Finland because as a small country we haven't had-can't afford not to take care of our finances in a good manner.

QUEST: Are you in favor of putting pressure on countries like Portugal to seek facility aid from European partners and the IMF, sooner rather than later, to avoid the fiascoes of Greece and Ireland. I think every country has to very carefully think what kind of options they have. And that is also the case when it comes to Portugal. So, of course, Portugal has said that they don't need the facility. That they are able to cope with the situation without that.

KIVINIEMI: So did Greece and so did Ireland. Yes, and of course we all hoped that that would be the case, but of course, if they already know that it will be impossible for them, in the long run. So that would be the case, sooner or later, so it better the decisions sooner than later.

QUEST: So, you would urge any country in this uncomfortable position to go sooner rather than later?

KIVINIEMI: Yes, I think that is best for Europe.

QUEST: To the European project, (inaudible) is not terribly popular at the moment, is it?

KIVINIEMI: I would have to say that the Finnish people have actually understood the situation quite well. But of course, we will see then at the next elections how well we have managed to explain the situation to the Finnish people.


QUEST: Finland's prime minister talking to me in Helsinki earlier. Now in a few moments' time we will also be hearing from another of the leaders at the summit, Fredrik Reinfeldt is Sweden's prime minister. And he joined me here in London a little earlier. We'll show you that interview in about 20 minutes from now.

Staying with news from Europe, Ireland's prime minister the Taoiseach, has called an election for March 11. Six members of his cabinet resigned. It was a few days after Brian Cowen survived a rebellion from within his own party. Five more government ministers have followed; the ring leader, Michael Martin, out of the door. National elections are being called which is-far be it for me to forecast-but it seems Fianna Fail Party seems certain to loose. The public turned on Mr. Cowen, as the party heads for a bailout from the EU and IMF. The PM says he believes history will look more kindly on his government austerity measures. The Irish ISEQ was down around 1 percent at the close.

A quick look at European markets. Stocks fell, figures showed China's de-accelerating economic growth. That fueled worries of government that will be raising rates. The FTSE was down. The DAX was down. The CAC was down. Zurich was down.

EasyJet shares slumped 16 percent after the new CEO said half-year losses could double because of rising fuel costs.

Now, when we come back in a moment. It is "Q&A" time. Ali Velshi and myself will be weighing up China's chances. The question is China be the next superpower by 2020? We will investigate that to the nth degree. Then there will be three questions. Sorting the men from the boys, between the U.S. and the China, after the break.



VELSHI: QUEST MEANS BUSINESS and so do I. We are here together in the CNN NEWSROOM and around the world.

Hello, Richard.

QUEST: And a good day to you, Ali. Good afternoon.

Each Thursday Ali and I bring you the world of business travel and innovation. I wish I could say it is easy. It's not because nothing is off limits. Now with that backdrop of President Hu Jintao taking a three- day trip in the U.S., today we're all about China.

VELSHI: Specifically, Richard, China's future. We're playing prognosticator. The question of the day is, will China be the new economic superpower by 2020?

Richard, you go first and you have 60 seconds.

QUEST: It is tempting to think that China is already the number one, certainly, if had heard the analysts talking about it. But the reality is, even though today China had GDP numbers up 10 percent in 2010, and high inflation, if you just take a nominal number, yes, China has a bigger population, is a bigger country and it will be a bigger economy probably by 2020. But that ignores the fact that U.S. GDP per capita, is $47,000. China's is just $7,500.

The core question is not who is the biggest. Size has never really meant much, in most cases. No, the core question is how does competitiveness fall out? And on that scale the U.S. needs to export more to China. Finally, who is the biggest? The European Union is the biggest economy, beating China, and the U.S.



VELSHI: Interesting point, Richard. You pointed out that the U.S. is not the biggest economy in the world. Something a lot of people don't know. But let me take it from here.

The U.S. is a superpower by the way we define the world. China is a superpower, too. But the Chinese are loath to advertise it. Hear me out on this. China's economic clout in the world is huge. Last year, China beat out Germany to become the world's largest exporter. China beat out Japan to become the world's second largest economy. China has a way to go to beat out the No. 1 economy, whether it is the U.S. or the European Union. But it is economic output is still only a third of that of the United States, and it is four times the population.

China's economy is going to catch up as you pointed out, probably within the next decade or two. But in Asia China's economic expansion goes hand in hand, Richard, with political and military expansion. It directly challenges Japan and to a big degree America's influence in that region. Along with China's huge foreign currency stockpiles, it is breeding confidence on the world stage, Richard. That encourages China to take more aggressive stands in favor of its national interests, in trade rules, in climate change, energy security, or the matter of North Korea.


And, Richard, bankers carry more clout than bullets do today. So, China is already a superpower.

QUEST: Hey, Ali, took another four seconds there, I do believe.

Something tells me Ali and I both agree at this particular point, that China's talk is a little bit overblown. But now we come to the difficult bit, Ali.

VELSHI: This is the time when The Voice comes in and separates the men from the boys-Voice.

THE VOICE: Good afternoon, gentlemen. Nice to be back from a well- deserved hiatus. Let's jump right into it.

Question one: China and Japan are the largest holders of U.S. debt as of the end of October. But which country is the third largest holder of U.S. Treasury bonds? Is it A., Brazil; B., Russia-


THE VOICE: Richard?

QUEST: Amongst that list it is the United Kingdom.

THE VOICE: Correct.

VELSHI: We must be on some kind of time delay, but I'll let him have that one.

THE VOICE: He's right. The United Kingdom is third with over $477 billion of held U.S. debt. China holds over $906 billion, while Japan holds over $877 billion.

Let's go to question 2. Good luck, Ali.

VELSHI: Thank you.

THE VOICE: China and the United States have by far the highest carbon dioxide emissions. China emits over 6,000 metric tons, while the U.S. emits over 59,000. But according to the U.S. Department of Energy, which country is the third highest emitter of carbon dioxide emissions? Is it A., Brazil; B., India; C., Japan; or D., Russia?



VELSHI: India.


THE VOICE: Incorrect. Richard?

QUEST: I would say, it is between Brazil and Russia.


QUEST: And I would say-

VELSHI: Brazil.

QUEST: Brazil.


THE VOICE: That's incorrect.

VELSHI: Ha, ha! You have got to stop taking advice from me, Brother. Hee, hee!

THE VOICE: The answer is actually Russia.

VELSHI: That was going to be my answer! Don't I get to ring the bell for that?


THE VOICE: Well, we have a third question, so calm down.


Here we go. According to the World Gold Council, the U.S. has the world's biggest gold reserves with over 8,000 metric tons. Which country has the second largest gold reserve? Is it A., China; B., France; C., Germany; or D., Italy?




VELSHI: China.


THE VOICE: Incorrect. Richard?

QUEST: You see that will teach you. I buzzed first, but The Voice chose you. The answer is simply, Germany.


THE VOICE: That is correct. Good job, Richard.

VELSHI: We could have a clean competition next week, Richard.

THE VOICE: Well, that ends my part.

QUEST: That-oh, is he still talking? That will do it for this week, for Ali and myself. Remember, we are each here Thursday. I am here on QUEST MEANS BUSINESS.

VELSHI: And I'm in the CNN NEWSROOM, 2:00 p.m. Eastern. Keep the topics coming in our blogs. You can go to for Richard, or Tell us each week what globally interesting question you want the two of us to talk about.

Richard, see you next week, brother.

QUEST: See you next week.

I don't know how I did it, but somehow we made it.

All right. China's president, we will continue to talk about, says let's be friends, U.S. Hu Jintao also faced some of his human rights critics. All this and a busy day on the markets over China's inflation worries. We are QUEST MEANS BUSINESS.


Good evening.


QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.

This is CNN. And here, we always have the news first.

Lebanon's caretaker prime minister in a live televised address announced that he would try to form a new government next week. Saad Hariri also says he will seek a new term as prime minister. His government collapsed last week after ministers loyal to Hezbollah stepped down. Turkey, Saudi Arabia and Qatar all tried to help but have given up.

Tunisia's interim cabinet has convened for the first time as demonstrators keep up daily protests. They are demanding anyone left from the old government be thrown out. Under that pressure, cabinet members are severing ties with the past. The former ruling party's leadership committee has been dissolved.

Another deadly attack on Shiite pilgrims in Iraq, this time in the holy city of Karbala. At least 32 people were killed and more than 150 were wounded with two suicide car bombs. Some reports put the death tolls even higher. Attacks across coun -- the country have killed nearly 120 people this week.

We're not interested in an arms race -- that was the message from China's president. It was a speech a short time ago where Hu Jintao told business leaders that he welcomed economic ties between China and the U.S. Earlier on Capitol Hill, Congressional leaders had a few human rights questions for the Chinese president. Afterwards, U.S. House Speaker John Boehner, who avoided last night's state dinner for Mr. Hu, called it a good meeting.

As the world watches Mr. Hu's big U.S. visit, investors are reacting to some even bigger, perhaps, economic news out of China just hours before he took to Capitol Hill. Shanghai's stock market took a dive, ending almost 3.9 percent lower on the day. Now, the Shanghai Composite has fallen quite sharply since the beginning of the year, and, indeed, factoring in the losses of last year, you start to see that it's a bit of a difficulty of what's -- of what's happening in the Chinese economy.

China said its economy grew 10.3 percent. But more important, its December inflation rate remains stubbornly high, at 4.6 percent. And that stoked investors' fears that rates would rise -- there's a consensus -- probably once or twice before the end of the year.

I asked our senior international correspondent, Stan Grant, in Beijing, for the view from China.


STAN GRANT, CNN CORRESPONDENT: Wrestling with a columnar spike (ph) is probably the best way to put. You know, with an economy that's steaming along like this, you grab a hold of it and it changes shape and moves on you. U.S. inflation is the worry here. You know, China has been growing, Richard, as you know, for near 10 percent for -- for the past decade. It's used to that. But now this worrying trend in inflation, particularly food prices, you're talking about a country here that still has a lot of very poor people -- a big gap between rich and poor. Inflation is not just a number. It goes to social issues. It goes -- it raises the potential for social unrest if people feel they simply can't feed themselves.

So that's really a -- a too -- a very topical issue here right now. And trying to get hold of that, while, at the same time, continuing to maintain this growth -- you know, China needs to grow around 10 percent to be able to provide employment for the hundreds of millions or tens of millions of people who flood to the cities and leave the rural areas every year.

QUEST: Right.

GRANT: So it needs to grow. But it needs to manage that growth. It needs to be quality growth. It needs to trickle down. And you've got to get hold of inflation before it runs away on you -- Richard.

QUEST: One of the interesting things on this set of numbers, I noticed, is that a lot of the current rate of growth actually is not just export-led, it is more products, more goods and services being bought by wealthier Chinese.

GRANT: Exactly. And more investment, as well, to meet that. You know, wages are rising here. More and more people, as I say, are coming to the cities, which have seen a rise in the middle class. And these are very discerning people, as well. They have a lot of money to spend and they're going after luxury items.

Still a long way to go, though, Richard. You know, if you've looked at the United States, where consumption makes up around about 70 of the GDP. Here, it's probably only a tick over 30 percent. They wanted to get it to about 50 percent that they -- so that they can meet that -- that -- that demand. They certainly have the supply. They certainly have the capacity. And that certainly is on the rise and we've seen the increase in retail sales and so on.

So you're right, the -- the economy is broadening here. There is some growth in other areas. And they want to be able to maintain that.

But guess what?

It comes back to inflation again. People have got money, they spend it, wages go up, prices go up. And as you know, the cycle continues.

QUEST: Finally, Stan, the -- the bit of a pasting that President Hu got on human rights in -- in Washington yesterday and the -- and the repeated questions, how far was that reflected in domestic coverage in China?

GRANT: Well, I can tell you something, whenever we mention the words human rights, whenever we talk about Liu Xiaobo, for instance, the Nobel Peace Prize laureate who is imprisoned here, we're blocked out. Our signal is simply blocked. It is a very sensitive issue.


QUEST: That was Stan Grant, our Beijing correspondent, talking to me earlier.

It's not the U -- just the U.S. that needs China and vice versa. We talked about that last night. The world, and especially China's neighbors, have a huge vested interest in the relationship with China and the bilateral with the United States.

If you join me over in the library, we will show you three countries where this has been very much in evidence over the last, say, 48 hours to a week.

South Korea, for example, has accepted North Korea's proposals to hold high level military talks. Now, the signal move is a possible move toward momentum between the rivals. The announcement comes after President Obama and President Hu called for sincere and constructive inter-Korean dialogue. And what it emphasizes, of course, is that whatever ideological similarities there may or may not be between China and North Korea, North - - China has a vested interest in ensuring that the -- that the contretemps with the South does not get out of hand.

This is a straightforward, interesting economic relationship. The Aussies sell huge amounts of raw commodities out of the ground onto the boat over to China. If China's economy has inflation -- and that might mean a slowdown of the economy -- it would hit Austria -- Australia. The Aussie dollar, it went to parity and then it reversed slightly again.

So China is one of the biggest trading partners. What you saw there was a direct reflection -- a direct reflection, of course, of the inflation numbers.

Japan's prime minister has timed some pointed comments at Beijing to do with the state visit. Prime Minister Naoto Kan voiced fresh concern about defense spending and said that Japan's prime minister also says Tokyo should focus on its own alliance with the United States.


NAOTO KAN, JAPANESE PRIME MINISTER (through translator): Emerging China is increasingly playing a significant role in the world and the region. We, however, cannot stop feeling some concerns over its opaque military buildup and increasing naval activities.


QUEST: The Japanese prime minister.

China's growing military might is proving to be a source of worry. And behind the pomp and ceremony surrounding the visit to Washington, security concerns are never far away. The economy may be front burner, but security is somewhere just behind.

Forty-five billion dollars worth of business contracts were signed between the two sides. An air of distrust still remains.

Maggie Lake has visited the Dallas, Texas based subsidiary of one Chinese company that some members of Congress say is a potential security threat.


MAGGIE LAKE, CNN CORRESPONDENT (voice-over): On the outskirts of Dallas, Texas, Chinese telecoms firm ZTE is gearing up for a weekly staff meeting.

LIXIN CHENG, CEO, ZTE (USA): Good morning, everyone.


CHENG: So, 2010 has been a great year for us at ZTE. We've officially now become number four in worldwide handset sales. So I would suggest we give ourselves a big hand for that.

LAKE: Founded in China in 1985, the telecom equipment maker generates global revenues of nearly $9 billion. But as it seeks to expand in the United States, it's running into opposition. Last October, four members of Congress published a letter seeking to block potential deals on the grounds of national security.

CHENG: We are not coming here trying to be a spy. We want to be part of the local community and fully comply with all the regulations and requirements. I think that the only challenge I see is that the people even know us enough. So we come here today and talk with you, and that's part of the effort.

And this is a very popular phone now in Verizon.

LAKE: Lixin Cheng has lived in the United States for 10 years, first working for Swedish telecoms firm, Ericsson.

CHENG: Hey, baby.

LAKE: He rejects accusations of any military influence over the company and says state-owned firms only have a 16 percent stake in the publicly traded company.

CHENG: The majority of all of our directors are an independent board of directors. So the influence from the -- the state-owned companies in China has no difference, no prevailing than any other U.S., just, you know, a company.

LAKE: Some of ZTE's U.S. staff admit they, too, have faced criticism for working for a Chinese firm.

CASEY COOKE, SERVICES MARKETING ENGINEER: Some of the friends say oh, you're -- you're going to the other side, you're helping China penetrate the U.S. And I say, well, if you shop at Walmart, you're spending your dollars there. I think of myself as getting some of those dollars back into American hands, because my paycheck comes from China.

LAKE: ZTE employs some 70,000 people around the world. And as the U.S. struggles with unemployment, the firm says it's planning to double its North American workforce.

COOKE: I've been here since May and it's very exciting. The previous company I worked for had been downsizing for eight or nine years and even the U.S. is in a recession right now, this company is growing.

LAKE: But as the workforce expands, some cultural differences remain.

UNIDENTIFIED FEMALE: Oh, that's the barbecued buns.

UNIDENTIFIED MALE: No, no. I think that's the barbe -- isn't that the barbecued bun?

UNIDENTIFIED FEMALE: That's the barbecued bun?

UNIDENTIFIED MALE: Yes, that's Morrises (ph).

UNIDENTIFIED FEMALE: That's on this plate (ph).

LAKE: Maggie Lake, CNN, New York.


QUEST: And we've already heard today from Finland's prime minister. In a moment, we will listen to the Swedish prime minister. Fredrik Reinfeldt joined me a short while ago. He says there has to be reform and it needs to be pretty soon.


QUEST: Sweden's prime minister is looking for a radical solution to Europe's sovereign debt crisis.

Fredrik Reinfeldt is in London for the summit of Nordic and Baltic leaders, which began today.

Of all the countries in attendance, his might be in the finest economic form. Certainly, it has the experience of dealing with a banking crisis which nearly took the country bankrupt in the 1990s.

I asked the prime minister what he's learned from the summit so far.


FREDRIK REINFELDT, SWEDISH PRIME MINISTER: David Cameron and I have - - have spoken about it, that this is a -- a good way of combining the fact that the problems we face today are across borders. And we need to discuss and look at each other's reforms, how to cope with this globalization and the pressure we have on our labor markets.

QUEST: What about your economy at the moment. Interest rates have risen several times for one very simple reason -- you have good, strong growth now in Sweden. You sit at the European table in an enviable position.

REINFELDT: That's correct. I think -- well, we're very different from others. We have now a balance in our public finances and we have growth figures of 4, 5, 6 percent. And, of course, that differs from -- from -- from the others.

QUEST: so what can you tell the others?

REINFELDT: Well, that we have been taking the crisis of the '90s and the financial crisis of 2008 head-on with -- meeting with reforms. We had good order in our public finances, even a surplus. And we used it to withhold the demand in the economy and to reform our labor market.

QUEST: Now, as a non-euro country, you won't necessarily be fully whacked up to the hilt with any bailout or stabilization fund. But bilaterally you have offered assistance and you will be involved in having to put something into the stability facility.

REINFELDT: Yes, that's correct. We have said that...

QUEST: So does it annoy you?

You -- you've done all your right -- you've done all the right things and those that didn't, you're paying the bill.

REINFELDT: OK. Well, half of our economy is export related. So we need to have a -- a Eurozone in good order and neighbors to be also with a good economy. So, yes, we've been involved bilaterally with Iceland and Latvia and we have said that we will also be part of -- of helping, if needed, to Ireland, because at the end of the day, to get a better European economy, we need to help each other.

QUEST: To get a better European economy, some would suggest there needs to be radical reform of the way the E.U. currency works.

Do you call for that?

REINFELDT: Yes. I -- I called for more reforms. And -- and to be very frank on that, the -- these crisis mechanisms are only the short -- short-sighted answer. We need a lot more reforms of our labor markets, the kind of budget national framework that we are having in Sweden and also a lot of reforms in our educational system. I think a lot of this is well known. I think of this is needed to be done in many countries. And that is what is lacking now in Europe.

QUEST: But at what point will there be change taking place?

It's all talk and very little action, it seems to be.

REINFELDT: I think, actually, there's a lot of things done now in Europe, under pressure because of the -- there are huge deficits that needs to be addressed. And, of course, a lot of the electorate throughout Europe are not happy with this.

But the good thing about the crisis is that you could also reshape your economy if you do things right.

QUEST: Or you could miss the opportunity.

REINFELDT: Yes, absolutely. And that -- we have seen many examples of that, as well. We had one of our deepest crises ever in the early '90s, where we learned from crashing banks and other things how to reform and how to meet for this that has served us well now.

QUEST: When do you believe you get ahead of this crisis in sovereign debt in Europe?

REINFELDT: Well, that's -- that's a good question. You see that part of Europe is now getting out better than a couple of years ago, especially the northern part of Europe. I think more needs to be done in the southern part and Central Europe, because now it's very much markets reacting to these countries' role in doing proactive reforms.

When will that -- this happen?

Well, we have these discussions. There are under pressure to do more, to reform more quickly. And I think that's the way to do it.


QUEST: And that is the Swedish prime minister talking to me earlier today. Food for thought.

When we return, the chief exec of the company that says it's the world biggest producer of fruit and veg. His concern, besides the weather, after the break.


QUEST: The rising cost of food is one of the big challenges to business this year. And we'll be keeping a close eye on this throughout the course of the next 12 months -- food riots, food concerns and simply food shortage.

Well, tonight, we begin with Dole Food, which calls itself the world's largest producer of fresh fruit and vegetables.

The chief executive, David DeLorenzo, rang the opening bell at the New York Stock Exchange.

And I asked him which way he thought the food security situation would go.


DAVID DELORENZO, PRESIDENT AND CEO, DOLE FOODS: Well, I think it -- it depends on -- it depends on how things develop, obviously. But I think it could even become more risky, simply because we're seeing varying weather, much more volatility in weather. And I don't know how long that's going to last. But, obviously for agriculture, weather volatility is not great. And so I think we might see different types of crops each year with volatility and -- and surpluses and shortages, which might be greater than in the past.

QUEST: But absent the weather, what is your biggest concern at the moment in your industry out internationally?

DELORENZO: Well, we'd like to see the economies pick up. We saw some pull back, obviously. We've been enjoying growth in Eastern Europe and Russia and all the developing economies. There has been a pull back. As those economies pick up, as we see greater per capita consumption of income and then followed by consumption, I think it will be better for -- obviously, for all the economies. We would all like to see better consumers and healthier consumers.

But, really, it's been the economy and we -- we do see it picking up now.


QUEST: The concerns of the chief exec of Dole Foods, one of which was, of course, the worsening -- or at least weather conditions.

The weather forecast is always of interest wherever you are. Improving conditions expected in London. Other parts of Europe may not be so lucky.

Pedram is at the World Weather Center.

I tell you, look, I know -- I know it's not spring by any means, but there -- there's a change in the way, he says.

PEDRAM JAVAHERI, CNN METEOROLOGIST: Oh, you can feel it, absolutely, Richard.

The conditions are absolutely gorgeous outside, at least will be the next couple of days for much of areas within the Northwest United Kingdom. And, really, the primary reason for that, a broad area of high pressure parked out directly overhead. That's deflecting the storm track, keeping much of the activity to the north and also bringing in a maritime air mass. So it's a milder set up.

Now, not shirts and t-shirts just yet, but certainly for this time of year, we'll take it and especially after what we've dealt with across that part of the world in the early part of December -- on into much of December, actually. And the coldest temperatures, I think, are going to be locked into the south now, at least below seasonal averages, with snow showers all across the border across western -- or stretching across the eastern portions of Europe into even areas of Eurasia over the next couple of days.

But look at these readings. The coldest temperatures, again, the colored contours, the blues here, the greens showing you some of the coldest readings on into the peripherals. You can see that stretch all the way south toward portions of Southern France into northern areas of Spain. That's where we'll have areas that will see the coldest, at least below seasonal averages. And the temperatures across the north should remain a little milder there, with sunny skies in the forecast.

Now, as far as snow showers, we're going to see those around Zurich. That will cause some travel problems over the next 24 or so hours. Then the heaviest snowfall around, say, Bosnia and Herzegovina there and also areas within Albania are going to see some snow showers, on into Ukraine and eventually out toward Russia, some snow showers in the forecast.

And speaking of Russia, take a look at this photograph. This coming out of St. Petersburg. This is the Kazan Cathedral and a sculpture made of ice shows you how pristine it is, how cold it is out there to support this. And the cold temperatures, of course, setting up a marvelous sight out there in portions of Russia in St. Petersburg.

And even much of the north-central portion of the United States, Richard, is dealing with a very cold air mass, where we're seeing some of these readings come in at 31 degrees below zero Celsius this morning in portions of the state of Minnesota. So it shows you, a cold air mass all across the board out there.

QUEST: All right, Pedram.

Many thanks.

Now, right after this program, the premier week of "PIERS MORGAN TONIGHT" continues. And it will be with Condoleezza Wright -- Rice. Tomorrow night, the guest is the man everyone is talking about, Ricky Gervais. In his first TV interview since his controversial night at the Golden Globes.


RICKY GERVAIS, ENTERTAINER: They hired me for a job. And if they didn't want me, they shouldn't have hired me. And...

PIERS MORGAN, HOST, "PIERS MORGAN TONIGHT": Someone -- someone asked me, you know, what do you think?

He's a fellow Brit on TV in America, what do you think of what happened to Ricky?

I said, well, it's a bit like inviting a -- a hammerhead shark to dinner and then when he eats all the guests, you start complaining. I mean...

GERVAIS: Well...

MORGAN: -- you've got to know what you're going to get.

GERVAIS: But that -- that's one thing. But, also, as I say, I don't think I did anything wrong. I honestly, you know, the -- those were light jibes at these people and I'm sure they've got a sense of humor.


QUEST: Ricky Gervais.

A big week of interviews. It's "PIERS MORGAN TONIGHT." It will happen here in about five minutes from now. But even sooner than that, I will have a Profitable Moment after the short break, ahead.

Good evening.


QUEST: Tonight's Profitable Moment.

On this program, we've heard from the prime ministers of Sweden and Finland, all of whom were in London for that Baltic and Nordic summit, along with other leaders. Now I'm not sure why they all came and came -- the need to come to the U.K. to talk. But nonetheless, David Cameron invited them and they all turned up.

And apparently, according to the Swedish prime minister, who told us earlier, they might do it all again next year in Stockholm, which will be colder than London.

Look, let's get back to the point. Both leaders, Finland and Sweden, have warned about the need for more reform in the European Union, especially in errant economies in the continent's south.

Sweden speaks from experience about its own banking crash in the 1990s. Finland's government is planning its own austerity measures and looks at Cameron's with admiration.

In Europe, it is usually the largest countries -- Germany, France, the U.K., Spain -- who make the most noise.

Well, there's much to be said for listening to the smaller voices. They have much to contribute.

And that's QUEST MEANS BUSINESS for tonight.

I'm Richard Quest in London.

As always, I thank you for your time and attention.

And whatever you're up to in the hours ahead, I do hope it's profitable.

Piers Morgan is ahead, after the news headlines.